Structural Approaches to Vector Autoregressions

Keating, John W.

doi:10.20955/r.74.37-57

Cited by 55 publications

(36 citation statements)

References 12 publications

(21 reference statements)

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“…Thus, historically observed variation in the data is interpreted to predict the consequences of an action not yet undertaken (Sims, 1986). By using VARs, it is attempted to reveal important dynamic characteristics of the economy without imposing structural restrictions from a particular economic theory (Keating, 1992). Hereby, the VARs method is argued to be atheoretical, that is, it uses a mechanical technique grounded to considerable extent on empirical sphere that is difficult to strike a balance with the economic theory.…”

Section: Structural Var Analysismentioning

confidence: 99%

“…The need for a theoretical formation resulted in the development of the technique of structural VAR (SVAR) model contributed by Blanchard and Watson (1986), Bernanke (1986) and Sims (1986) 12 . This technique of SVAR allows one to use economic theory to incorporate the reducedform VAR model into a system of structural equations (Keating, 1992). Accordingly, one can obtain the dynamic effects in a multivariate system grounded on the theoretical sphere.…”

Section: Structural Var Analysismentioning

confidence: 99%

“…In determination of both types of restrictions previous studies and certain facts are utilized. Following Keating (1992) and Keating et al (2014), both measures of interest rate and money are included besides the output and prices in the model setting so as to see the responses to different policy instruments when interest rates and money supply are simultaneously represented within SVAR system. Given a relatively short sample period, a 4-variable SVAR model is preferred.…”

Section: Svar Modelmentioning

confidence: 99%

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Divisia and Simple Sum Monetary Aggregates: Any Empirical Relevance for Turkey?

Polat

2018

Journal of Central Banking Theory and Practice

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In consideration of channels through which monetary policy affects economic activity, the monetary aggregates have been mostly ignored by the monetary authorities instead of which shortrun interest rates have been given a priori role. These monetary aggregates are largely argued to fail in measuring the effectiveness of different monetary policy regimes in forecasting the macroeconomic fundamentals. Grounded on the "Barnett critique", the formation of traditional simple-sum monetary aggregates assuming for perfect substitution among the components of the money supply is blamed for such a failure of money in explaining the real activity. Given increasing varieties of financial assets which have completely different "moneyness", it is important to provide an alternative measure of the money supply. Hereby, the Divisia monetary aggregates which give different weights to different assets have arisen as an alternative approach. In this study, a Divisia index is constructed to test its predictive power on quantities and prices compared to its simple sum counterpart. Accordingly, a Divisia index is built-up for Turkish economy for the period 2006-2016 to see whether the utilization of the Divisia monetary aggregates in the conduct of monetary policy makes any difference compared to that of traditional simple sum money supply. Under different specifications, though the relative power of the Divisia aggregates in predicting quantity and price variables is found, still, it can be argued that theoretically well-rounded formation of the Divisia index is not that much empirically justified for the case of Turkey.

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Section: Structural Var Analysismentioning

confidence: 99%

Section: Structural Var Analysismentioning

confidence: 99%

Section: Svar Modelmentioning

confidence: 99%

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Divisia and Simple Sum Monetary Aggregates: Any Empirical Relevance for Turkey?

Polat

2018

Journal of Central Banking Theory and Practice

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“…Although economic and institutional arguments can be used to rationalize each identification scheme, there is no consensus as to which approach to identifying shocks is preferred, and the weaknesses of both approaches have been discussed in the literature. 1 Keating (1992), Lastrapes andSelgin (1995), andMcCarthy (1995) consider limitations of the use of contemporaneous identifying restrictions. Faust and Leeper (1997) discuss potential drawbacks of imposing long-run restrictions.…”

Section: Introductionmentioning

confidence: 99%

“…The approach in this paper is similar in spirit to Keating (1992) and Lastrapes (1998). However, these studies focused upon the effects of money supply shocks while the focus of the current study is upon monetary policy shocks.…”

Section: Introductionmentioning

confidence: 99%